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Donovan Inc. is considering an acquisition of Gilhooly Corp. Donovan has 3,912,753 shares outstanding selling for $47.38. Gilhooly has 1,358,728 shares outstanding selling for $32.14. What are the market values of both firms? In a stock-for-stock offer how many shares of Donovan stock will each Gilhooly equity holder receive for his share (if they allocate purely on the basis of the current prices)? If there are no synergies, what is the value of the combined entity? How many shares will be outstanding after the acquisition? What is the value of each share? What portion of the stock will the old Donovan shareholders hold in the firm after the acquisition? Next, assume that Donovan has adequate excess-cash-on-hand to pay each shareholder of Gilhooly $9.75. If they wish to make an acquisition based on a combination of stock and cash, how many shares of Donovan stock must each Gilhooly equity holder be given to buy-out the remainder of his share beyond the $9.75? If there are no synergies, what will be the value of the combined firm (recall that each shareholder of the Gilhooly stock is being given $9.75, so the value of the firm will decline accordingly)? How many shares will be outstanding after the acquisition? What is the value of each share? What portion of the stock will the old Donovan shareholders own in the firm after the acquisition? Finally, presume that the merger will create synergies that have a present value of $27,000,000. Assume the two firms execute a straight stock-for-stock offer at the exchange ratio calculated in the first example above. What is the firm value, the number of outstanding shares, and the share price after the acquisition?
Abercrombie & Fitch has inventory levels of $385,857 thousand and $310,645 thousand at the end of fiscal-year ending 2011 and 2010 respectively. Cost of goods sold for 2011 is $1,256,596 thousand. Calculate the inventory turnover ratio and the avera..
Artisan’s is considering leasing a new computer. The lease terms include five annual payments of $1,500 with the first payment occurring when lease is signed
Suppose you are a finance student interviewing for a job and the interviewers ask you what would cause an increase in net working capital. Which of the following would be the best response?
What is a mutually exclusive investment project? An independent project? A contingent project? Give an example of each. What effect does capital rationing have on a firm's ability to maximize shareholder wealth?
A bondholder owns 15-year government bonds with a $5 million face value and a 6 percent coupon that is paid annually. The bonds are currently priced at $550,018.73 with a yield of 5.034 percent. The bonds have a duration of 10.53 years. If interest r..
What is the price of a U.S. Treasury bill with 68 days to maturity quoted at a discount yield of 1.30 percent? Assume a $1 million face value.
Allocate the joint costs using relative weight. With these costs, what is the profit or loss associated with Copper?
The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips, and a tracking chart. The finished product sells for $ 35 with a variable cost per unit of $21...
Your investment has a 20% chance of earning a 30% rate of return, a 50% chance of earning a 10% rate of return, and a 30% chance of losing 6%. What is your standard deviation on this investment?
Who decides the delivery options on a future contract that has already been entered into?
Suppose the market equilibrium price for immunizations is $40 and the volume is 25,000. Identify three providers of immunization services.
The current stock price for a company is $33 per share, and there are 4 million shares outstanding. The beta for this firms stock is 1.1, the risk-free rate is 4.9, and the expected market risk premium is 5.8%. If the corporate tax rate is 37%, what..
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